National interest is still coming out ahead of the common good as the Eurozone countries teeter on the brink yet again.
Spain insists a bail out is not needed despite a budget deficit of billion and banks up to their necks in bad debt.
The government is grimly hanging on because they do not want savage economic realities thrust upon them like Portugal and Ireland are facing for their indebted ways after seeking hand outs.
Spain’s refusal to put out the begging bowl has hamstrung the European Central Bank’s safety mechanism (ESM) painstakingly put in place by ECB president Mario Draghi as the bank cannot act until someone asks for money.
Portugal has just announced a raft of austerity measures, including tax hikes and new property taxes, with the aim of reducing the deficit below 3% in three years.
France, although in no need of a hand out, has also launched a new tax regime aimed at soaking the rich to balance the books.
Tim Kirkham, director, risk advisory at foreign currency specialists HiFX explains more about the Eurozone rescue fund
“The permanent €500 billion rescue fund has been launched amidst a fanfare of damp fireworks,” he said.
“There are a number of issues unresolved, most crucially whether Irelands €64 billion of bank bailout debt and Spain’s €40 billion of banking assistance will be guaranteed by the ESM lowering funding costs and allowing the countries to move forward.
“It appears that talks have become stuck in thick political gloop, awaiting the formation of the single Eurozone bank supervisor, as Berlin seeks to delay the set-up of that body until after its 2013 elections.
“This multi-directional help that has been offered to the Euro area from the ESM and the ECB gives an air of panic as the leaders try and make amends to a sovereign debt crisis that had got out of control.”
Although nothing seems to be moving, some good has come out of the ESM, says Kirkham.
“It has confirmed two things: The European Union has intentions of becoming more unified and they are willing to give unlimited support to the Euro,” he said.
“Let’s not forget that despite some frustration in Germany about the financial behaviour of some of the peripheral economies in the EU, both political parties and indeed the consensus is to back the Euro.
“Therefore despite the euphoric bounce to the Euro in reaction to the ESM and more recently to the ECB’s decision to offer unlimited support, this all comes in return for cuts and this is acting as a gravitational force for the Euro.”